JW Marriott is latest hotel at risk of default

A portion of CMBS loan on the 610-key luxury downtown property was sent to special servicing

Estein USA COO Lance Fair and JW Marriott Chicago (Credit: Estein; Google Maps)
Estein USA COO Lance Fair and JW Marriott Chicago (Credit: Estein; Google Maps)

The financial stress the coronavirus has exacted on Chicago’s downtown hotels, whose occupancy rate hovers around 13 percent, has reached a crisis point for many.

And luxury hotels are not immune.

Now, a $40 million senior portion of JW Marriott Chicago’s $203 million mortgage has been transferred to special servicing and is in danger of default, according to Crain’s, citing a Bloomberg report.

The debt on the 610-key hotel at 151 W. Adams St. is part of a CMBS loan, and the special servicing move may also be an indication the mortgage terms need to be restructured to avoid default.

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According to the report, the hotel owner — a unit of Florida-based real estate firm Estein USA — was late on its May debt service payment. The company now contends it has made that payment. The loan was transferred to Rialto Capital Management for special servicing, the report noted.

Illinois is one of the last states that has remained essentially locked down amid the pandemic, and in Chicago, overall hotel occupancy rates were at 24 percent, according to the latest numbers from hospitality research firm STR.

The desperation in Estein COO Lance Fair’s words were apparent when discussing the situation. “We need the mayor to open the city back up and get the city back open for business,” Fair said, according to Crain’s.

Nationwide, U.S. hotel occupancy rates have plummeted — although they are slowly rising as states reopen for business in stages — and the commercial mortgage-backed securities market has seized up. Billions in hotel loans have been sent to special servicing.

Locally, Thor Equities skipped its April loan payment on the $427 million refinance it took out on the 1,600-key Palmer House Hilton. Thor bought the Palmer House for $230 million in 2005, and finished a $131 million renovation in 2008. The CMBS loan was transferred to a special servicer when Thor failed to pay its $1 million debt service. [Crain’s] — Alexi Friedman 

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